Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Meridian Medical Systems, LLC

United States District Court, D. Maine

June 10, 2016

IN RE MERIDIAN MEDICAL SYSTEMS, LLC, Debtor
v.
JEFFREY CARR and ROBERT ALLISON, Appellees KENNETH CARR AND APPLIED THERMOLOGIC, LLC, Appellants
v.
MERIDIAN MEDICAL SYSTEMS, LLC, Appellee Bk. No. 15-20640 PGC Adversary No. 15-2028

          DECISION AND ORDER ON APPELLANT’S MOTION FOR LEAVE TO APPEAL FROM THE BANKRUPTCY COURT’S ORDER DENYING HIS MOTION TO ABSTAIN AND REMAND

          D. BROCK HORNBY UNITED STATES DISTRICT JUDGE

         The debtor in this Chapter 11 bankruptcy matter removed a related state lawsuit from the Business and Consumer Docket in Cumberland County, Maine, to the federal Bankruptcy Court. One of the parties to that removed lawsuit moved the Bankruptcy Court to abstain and remand the lawsuit back to the Business and Consumer Court. The Bankruptcy Court denied the motion, and the moving party now requests leave to appeal the Bankruptcy Court’s order if I conclude that his appeal is interlocutory. In the alternative, he appeals as of right from the Bankruptcy Court’s order. I conclude that the appeal is interlocutory, and I Deny the motion for leave to appeal. The appeal is therefore Dismissed without prejudice.

         Background

         The debtor Meridian Medical Systems, LLC (MMS) is a closely-held company that was founded by Kenneth Carr (Kenneth[1]). Appellant’s Mot. for Leave (ECF No. 2) at 2.[2] Until 2010, Kenneth owned 99% of MMS and served as Manager, Chairman, Chief Executive Officer, Treasurer, and Secretary. Id. In late 2010 and early 2011, Kenneth gave his son, Jeffrey Carr (Jeffrey), an ownership interest in MMS. Id. In 2011, Robert Allison (Robert) became a Member of the closely-held company. Id.

         From 2010 to 2013, Kenneth made a significant number of personal loans to MMS with no specified time for repayment, and Kenneth provided consulting services on behalf of MMS, for which he is also owed money. Id. at 3; Adv. Proc. 1-5 at 17. Kenneth asserts that he is the largest unsecured creditor in MMS’s Chapter 11 bankruptcy case, see Appellant’s Mot. for Leave (ECF No. 2) at 3, but he has not yet filed a proof of claim. See D. 83, 92; Tr. of Hr’g, Bankr. Ct., Nov. 3, 2015 (ECF No. 13) at 7.

         In 2013, Jeffrey and Robert removed Kenneth from his management positions with MMS. Adv. Proc. 1-1 at 5-6. Kenneth then formed another competing company, Applied Thermologic, LLC (Applied Thermologic). Id. at 11. In 2014, MMS filed a complaint against Kenneth and his new company in the Maine Superior Court alleging breach of contract, misappropriation of trade secrets, conversion, breach of fiduciary duty, fraudulent concealment, and negligent misrepresentation. Id. at 14-21. The same day that MMS filed its complaint, it filed an application to transfer the state court matter to the Business and Consumer Docket, which was granted. Adv. Proc. 1-4, 3-3. Thereafter, Kenneth filed an answer and counterclaims against MMS and filed a third-party complaint against Jeffrey and Robert alleging breach of fiduciary duty, violation of Maine’s LLC Act, breach of contract (including implied covenant of good faith and fair dealing), intentional infliction of emotional distress, and negligent infliction of emotional distress. Adv. Proc. 1-5, 1-6 at 6-11. Jeffrey and Robert, in turn, filed their answer and third-party counterclaims against Kenneth alleging much of the same. Adv. Proc. 3-11.

         After over a year litigating in the Business and Consumer Court, in 2015 MMS filed in federal Bankruptcy Court a voluntary petition under Chapter 11 of the Bankruptcy Code. D. 1. MMS also filed a verified adversary complaint, seeking to extend the automatic stay to Jeffrey and Robert (MMS’s managing Members) and to enjoin Kenneth from pressing his claims against Jeffrey and Robert in state court. D. 39; I Adv. Proc. 1. MMS also removed the state lawsuit to the Bankruptcy Court under 28 U.S.C.A. § 1452 (2010 & Supp. 2015). D. 38; Adv. Proc. 1. Kenneth then moved the Bankruptcy Court to abstain, arguing that abstention was mandatory under 28 U.S.C.A. § 1334(c)(2) (2010 & Supp. 2015), or, in the alternative, that the Bankruptcy Court should exercise its discretion to abstain and remand the case to the Business and Consumer Court because it involved only state common and statutory law issues and “did not implicate any bankruptcy issues.” Adv. Proc. 8. The Bankruptcy Court heard argument twice on Kenneth’s motion to abstain and denied his motion from the bench. Tr. of Hr’g, Bankr. Ct., Nov. 3, 2015 (ECF No. 13); Tr. of Hr’g, Bankr. Ct., Nov. 17, 2015 (ECF No. 13-1) at 19; Adv. Proc. 21. The Bankruptcy Court also issued a written order denying Kenneth’s motion to abstain, Adv. Proc. 26, and denied his motion for findings of fact and conclusions of law, Adv. Proc. 43. Kenneth timely filed his notice of appeal and his motion for leave to appeal the Bankruptcy Court’s order with this court. ECF No. 1.

         Jurisdiction

         As an appellate court, the district court is “duty-bound to determine . . . jurisdiction over this appeal before proceeding to the merits.” In re Henriquez, 261 B.R. 67, 69 (B.A.P. 1st Cir. 2001). The District Court or the Bankruptcy Appellate Panel may hear appeals from “final judgments, orders, and decrees[, ]” 28 U.S.C.A. § 158(a)(1) (2010 & Supp. 2015), or “with leave of the court, from other interlocutory orders and decrees[, ]” id. § 158(a)(3). The appellant Kenneth elected to have his appeal heard by the District Court. Id. § 158(c)(1)(A); ECF No. 1 at 2.

         Analysis

         The first issue I must address is whether the Bankruptcy Court’s order was final and therefore immediately appealable as a matter of right pursuant to 28 U.S.C.A. § 158(a)(1). The First Circuit definitively ruled on this issue in In re González, 795 F.3d 288 (1st Cir. 2015), cert. denied sub nom. Sitka Enters., Inc. v. Miranda, 136 S.Ct. 587, 193 L.Ed.2d 468 (2015). In that case, a plaintiff in a commonwealth court case in Puerto Rico moved the Bankruptcy Court to abstain from hearing a matter that the bankruptcy trustee had removed from commonwealth court to the Bankruptcy Court. Id. at 289. The Bankruptcy Court denied the motion to abstain, the District Court dismissed the appeal as a non-final order over which it did not have jurisdiction, and the First Circuit affirmed the dismissal. Id. at 289-92. The First Circuit’s reasoning in González applies with equal force to the appellant’s claim here:

Under the general federal removal statute, this circuit treats an order refusing remand to state court in a diversity case as a non-final interlocutory order which is not immediately appealable. BIW Deceived v. Local S6, Indus. Union of Marine & Shipbuilding Workers, 132 F.3d 824, 829 (1st Cir. 1997). Other courts have reached the same conclusion in bankruptcy as to a refusal to abstain under [28 U.S.C.A.] § 1334(c)(2), noting that such a refusal “d[oes] not ‘end[ ] the litigation on the merits and leave [ ] nothing for the court to do but execute the judgment.’” Beightol v. UBS Painewebber, Inc., 354 F.3d 187, 189 (2d Cir. 2004) (Sotomayor, J.) (second and third alterations in original) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978)); accord Schuster v. Mims (Matter of Rupp & Bowman Co.), 109 F.3d 237, 240-41 (5th Cir. 1997); see also Krasnoff v. Marshack (In re Gen. Carriers Corp.), 258 B.R. 181, 187 (9th Cir. BAP 2001) (collecting cases). We agree. A refusal to abstain “merely determine[s] where the case w[ill] be adjudicated; it d[oes] not resolve any of the substantive issues raised in the lawsuit.” Beightol, 354 F.3d at 189; see also 1 Collier on Bankruptcy ¶ 5.08[5] (noting that “orders in which the merits are not determined” are generally not final).

Id. at 291 (alterations in original) (footnote omitted). Therefore, Kenneth’s appeal here is interlocutory, and the issue is whether I should grant him leave to appeal.

         Section 158 of Title 28 of the United States Code allows an appeal of an interlocutory order to be taken “with leave of the court[.]” 28 U.S.C.A. § 158(a)(3). Although section 158 provides discretionary authority to hear appeals of interlocutory orders, it provides no express criteria to guide that discretion. See id. Consequently, “most courts utilize the same standards as govern the propriety of district courts’ certification of interlocutory appeals to the circuit courts under [28 U.S.C.A.] § 1292(b).” In re Bank of New England Corp., 218 B.R. 643, 652 (B.A.P. 1st Cir. 1998); see In re Jackson Brook Inst., Inc. (Jackson Brook I), 227 B.R. 569, 579 (D. Me. 1998) (collecting cases). Under this standard, leave to appeal is appropriate for orders that concern (1) a controlling question of law, (2) for which there is a substantial ground for a difference of opinion, and (3) the immediate resolution of which may materially advance the ultimate resolution of the litigation. In re Flynn, 402 B.R. 437, 441 n.4 (B.A.P. 1st Cir. 2009); In re Bank of New England Corp., 218 B.R. at 652; Jackson Brook I, 227 B.R. at 581. “Courts have stated that interlocutory certification under section 1292(b), and thus leave to appeal under section 158(a)(3), should be used ‘sparingly and only in exceptional circumstances.’” Jackson Brook I, 227 ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.